fuboTV’s (FUBO) recent Q2 earnings made mincemeat of the Street’s expectations and provided little to feast on for the sports-focused streamer’s army of bears. The bad news for FUBO detractors is that there are two reasons to think the company’s promising 1H21 results could get even more of a boost in the year’s second half.
For one, as Barrington’s James Goss notes, “There is significant seasonality in the business tied to the sports schedule, creating stronger growth trends in the second half of the year.” The fact FUBO has just increased its subscriber guidance for the rest of the year obviously suggests the company is anticipating a boost in this most important of metrics.
FUBO’s tremendous growth cannot be ignored, and growth-focused companies are often forgiven the steep losses so long as the outsized growth continues. But questions still remain about the company’s path to profitability, as its business is based on razor thin margins in a hugely competitive industry with plenty of well-capitalized rivals.
But here, FUBO is also showing progress, with subscriber acquisition costs (SACs) continually dropping while advertising revenue keeps on growing.
Goss here is philosophical, noting that, “Creation of this vision requires execution of a plan that grows subscriber levels and revenues well in advance of creation of profit metrics.”
But possibly above all else, it is the second tailwind lined up for FUBO, which could really see the business take off to another level and substantially improve its bottom-line performance.
In the recent earnings call, management reiterated it remains on track to add sports wagering functionality to the platform by Q4, preceded in this quarter with the launch of an FTP (free-to-play) wagering app. This is a factor that should be taken into consideration.
“Development of profitability and cash flow targets will take time,” said Goss, “With progress toward achieving internal targets partly reflecting the balance management attempts to strike between growth and investment. The move into sports gambling is arguably the biggest wild card in this regard, while potentially offering the greatest incremental return.”
Therefore, the Barrington analyst rates FUBO an Outperform (i.e. Buy), along with a $37 price target, implying one-year gains of ~40%. (To watch Goss’ track record, click here)
Of all 7 FUBO reviews on record, only one is skeptical, suggesting to Hold, while the rest say Buy, resulting in the stock’s Strong Buy consensus rating. The forecast calls for share gains of ~66%, given the average price target clocks in at $43.86. (See FUBO stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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